Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698944143770.pdf (South Africa)
State of Local Government Finance Section 71 quarter 4 local government results as at 30 June 2019 NCOP Provincial Week – 16 to 20 September 2019 National Treasury Audit Outcomes 2017-18 Municipal Financial Year Highlights….AG Report 2017/18 • Reduction in the number of clean audits in 2017/18 • 18 in 2017/18 versus 33 in 2016/17 • Unqualified financial statements decreased from 61% to 51% • 63 municipalities regressed in their results (only 22 improved) • Highest level of non-compliance with key legislation since 2011/12 (81%) • R907m paid to consultants to assist with financial statements preparation • Only 19% of municipalities could provide financial statements without material misstatements • • • 74% of municipalities did not adequately follow up allegations of financial and supply chain management for misconduct or fraud 45% of municipalities did not have all the required mechanisms for reporting and investigating transgression or possible fraud Irregular expenditure is still high at R25.2bn (slight decline from R29.7bn in 2016/17) 3 Summary of 2017/18 Audit Findings The three main indicators of the deteriorating accountability 1.Overall, the audit outcomes regressed – – – Municipal audit outcomes have shown little improvement Deadline for submission of the annual financial statements to the AG had been met by only 90.7 per cent of municipalities Unqualified with no findings decreased from 33 municipalities in 2016/17 to only 18 in 2017/18 Increasingly difficult environment for auditors and 3. other role players in accountability – – – The AG expressed his concern about pressure that is placed on auditors to change conclusions to avoid negative audit outcomes or the disclosure of irregularities Intimidation and threats towards auditors were reported.
Protest actions at municipalities also impacted the auditing process and resulted in delays to the finalization of audits – While disclaimers increased from 24 to 26 in the same period – Audits of 63 municipalities regressed 2.
A lack of consequences for transgressions and irregularities – – – – The AG noted with concern that recommendations made in previous years to improve audit outcomes and or investigate irregularities were not implemented Status record review and engagements with municipal managers yielded little benefit as recommendations were not implemented Management (municipal managers and senior management), political leadership (mayors) and oversight bodies (municipal councils and portfolio committees) do not respond with the required urgency to the AG’s messages about addressing risks and improving internal controls.
Political infighting at council level and interference in administration weaken oversight, hinder the effecting of consequences, and make local government less attractive for professionals to join The impact of deteriorating accountability • two key areas of the financial health of municipalities and the delivery and maintenance of municipal infrastructure impact: – – – – – – – Vacancies and instability in key positions increasing indicators of a collapse in local government finances inability to collect debt from municipal consumers financial woes of local government also weighed heavily on municipal creditors shortcomings in the development and maintenance of infrastructure lack of attention paid to water and sanitation infrastructure maintenance of roads also did not receive the necessary attention 4 The State of Local Government Finances and Financial Management Report as at 30 June 2018 Financial assessment criteria No.MeasurePurpose1.Cash as a percentage of operating expenditureTo determine cost coverage: does the municipality have adequate cash available to meet its operating expenditure requirements?
2.Negative cash balancesIdentifies whether cash shortages/bank overdrafts pose a “chronic” problem for the municipality.4.Under spending of original capital budgets Tests the effectiveness of municipal spending and also provides an indication of whether, for example, municipalities are compromising on capital programmes to resolve cash flow challenges, are there planning deficiencies which are impacting on service delivery.5.Debtors as a percentage of own revenueExamines municipalities' revenue management capabilities.7.Creditors as a percentage of cash and investmentsIs the municipality able to meet its monthly commitments?
Does it have sufficient cash to pay its creditors in line with the requirements of the MFMA (cost coverage)?8.Reliance on national and provincial government transfersDetermine the levels at which municipalities are able to generate own funds to finance revenue generating assets to enhance and sustain revenue generating streams.3.Over spending of original operating budgetsTests the effectiveness of municipal spending in accordance with the resources available to them.
What is the credibility of the budget and are municipalities able to adjust expenditure should planned revenues not materialise?

6.Year on year growth in debtorsIs the municipality exercising fiscal effort in collecting outstanding debt?

To what extent is financial distress the result of poor debtor management?
Highlights….State of LG Finances as at 30 June 2018 (1) • 48% (or 124) municipalities have less than 3 months of cash coverage • This include 3 of the metros • Overspending of operating budgets has shown only a marginal improvement from last year • There are still 51% (or 131) municipalities who overspent in 2017/18 • 25 of these municipalities (incl.
2 secondary cities) overspent by more than a quarter of their total adjusted budget • Underspending of capital budgets persists with almost 36% (or 92) municipalities overspending by more than 30% • Metros failed to spend 20.6% of their capital budgets • Total outstanding consumer debtors have grown significantly over the last financial year: • Total consumer debtors reported as R152.7bn an increase of R44.5bn from 2016/17 7 Highlights….State of LG Finances as at 30 June 2018 (2) • Total outstanding creditors remains concerning.
The problem is particularly acute in the metros and secondary cities: • 6 metros and 13 secondary cities have creditors exceeding 75% of available cash and investments • Average spending on R&M as a % of PPM is predicted to be in the region of 3.5% which is still significantly below the norm of 8% • Water and Electricity Losses are still very high and consequently has a negative impact on potential revenues 8 Financial Distress Financial Year No of Municipalities in Financial Distress 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 95 86 87 95 128 125 9 Unfunded Budgets Financial Year No of Municipalities adopting unfunded budgets % of total number of municipalities 2015/16 2016/17 2017/18 2018/19 82 74 83 113 29.5% 28.8% 32.2% 44.0% What does an “unfunded” budget” mean?
Leading indication that even before the start of a financial year, municipalities will have: × Inadequate resources to fund operational expenditure × Inadequate resources to meet all current liabilities over the MTREF × No internally generated funds to fund capital expenditure × Liquidity challenges - unable to pay salaries, etc.
× Unable to pay service providers – impacts service provision × Dependent on grant funding - capital programme will not address broader development issues × Use of LGES to pay creditors 10 A growing number of municipalities approved unfunded budgets Funded/unfunded Budgets • • 113 Municipalities adopted “unfunded budgets” for 2018/19 financial year The number of “unfunded budgets” are increasing at an alarming rate: 2015/16 82 of 278 = 29.5 per cent – 2018/19 113 of 257 = 43.9 per cent – • New demarcations in 2016/17 did not assist to improve the overall funding position of municipalities An unfunded budget position is indicative that: • – Municipalities will not have adequate resources to fund the operational expenditure and to meet all current liabilities over the MTREF – Municipalities have over R35 billion in arrears according to the s71 of MFMA report for the period ending 30 June 2019.
Included in this amount are arrears for: o Electricity to Eskom - over R20.0bn; and o Water to the water boards and raw water to the DHSWS - over R7.7bn • The analysis shows that some municipalities would take up to 22 years to repay their debts to Eskom based on the • current financial situation Losses in VBS has undermined ability to pay creditors and salaries – Internally generated funds are not available to fund capital expenditure – Inability to meet current liabilities has a major impact on service providers 11 Governance : Acting MMs and CFOs positions • • • • with trend Decrease in acting MMs was noticeable in KZN (from 31.1% to 9.3%) , WC (36.7% to 10%) and NW (47.8% to 22.7%) was A similar acting observed in CFOs.
The number Eastern Cape decreased by 10 (from 14 to 4), in KwaZulu-Natal by 6 (from 16 to 10) and in Limpopo by 3 (from 10 to 7) Instances where both MM and CFO were in an acting capacity decreased over the same period from 50 to 18 The largest percentages of in acting MMs Northern Cape Province (25.8 per cent acting), North West Province (22.7 per and Mpumalanga Province (20 per cent acting) acting) cent was Government’s investment in capacity building over • National government invests R2 billion every year in capacity building for local government • Contrary to this substantial investment in *S154 support, very little is invested in ensuring of success the government’s *S139 responsibilities *Refers to Section in the Constitution 13 Table 18: Capacity-building and other current grants to local government 2014/15 - 2020/212014/152015/162016/172017/182018/192019/202020/21R millionAdjusted budgetDirect transfers1,621 1,446 1,861 1,977 2,043 2,136 2,769 Local government financial management 449 452 465 502 505 533 562 Municipal human settlements capacity300 100 – – – – – Expanded public works programme integrated grant for municipalities595 588 664 691 693 742 783 Infrastructure skills development104 124 130 141 141 149 158 Energy efficiency and demand-side management137 178 186 203 215 227 240 Municipal demarcation transition– 4 297 140 – – – Municipal restructuring grant– – – – – – 514 Municipal emergency housing grant– – – – 140 149 159 Municipal disaster relief36 – 118 300 349 335 354 Indirect transfers252 251 19 103 115 122 128 Municipal systems improvement252 251 19 103 115 122 128 Total 1,873 1,698 1,880 2,081 2,158 2,257 2,898 OutcomeMedium-term estimates Section 71 quarter 4 local government results as at 30 June 2019 Highlights….S71 reporting 4th Q (2018/19) Total revenue R404.7bn – 92.1% Total expenditure R391.8bn – 87.9% Capital expenditure R55.4bn – 75.3% • Highest YTD revenue: Gauteng 95.9% followed by Mpumalanga at 94.9%.
Lowest reported at Limpopo at 80.1% • Highest YTD expenditure: Gauteng 94.4% followed by Free State 93.4%.
• Highest capital expenditure: Gauteng 83.9% followed by Mpumalanga at 83.2% • Free State has the lowest capital spending at 62.7% Employee expenditure R105.2bn –93.1% Is on average 32.1% of operational expenditure • • Spending levels in Gauteng – 96.1% followed by KwaZulu-Natal – 95.8% and Eastern Cape 93.9% Conditional grant spending R27.2bn – 80.1% Debtors age analysis R165.5bn Cash position R50.1bn Creditors age analysis R60.2bn • Highest grant spending – Expanded Public Works Programme Integrated Grant 100% • Lowest grant spending – Municipal Systems Improvement Grant 17% • Government debt – 6.2%, Household debt – 71.7% • 0 – 90 days debt – R29.6bn • 45 municipalities have negative cash position, increase of 20 municipalities from 3rd quarter • Creditors longer than 90 days outstanding: Free State 89.3%, Northern Cape 76.7% and Mpumalanga 75.5% and Section 71 Publication for 4th Quarter 2018/19 (as at 30 June 2019) – Revenue performance • • Aggregated billing amounted to 92.1 per cent or R404.7 billion of a total adopted revenue budget of R439.5 billion (total revenue excludes capital transfers) Collection rate average Expenditure performance – Municipalities in aggregate spent 87.9 per cent or R391.8 billion of the total adopted expenditure budget of R445.7 billion Capital performance • • – – Municipalities capital budgets was R73.6 billion, which is an increase of R2.2 billion when compare to the same quarter in 2017/18 financial year Spending levels for capital for the 4th quarter is 75.3 per cent or R55.4 billion • Conditional grant performance – Grant expenditure was 80.1 per cent or R27.2 billion of the R33.6 billion transferred 16 Collection Rate indicators as at 30 June 2019< 5050 - 5960 - 6970 - 7980 - 94>= 95Unknown43153029526622 Revenue analysis as at 30 June 2019 Highlights: 30 June 2019 Aggregated Billing: 30 June 2019 Total Adjusted Revenue Budget: 2018/19 Metros R404.7 billion 92.1 per cent R439.5 billion 60.7 per cent of total aggregated revenue in 2018/19 Operational revenue collection 94.8 per cent (30 June 2019) 6 per cent compared to 4th quarter of 2017/18 BILLED REVENUE ≠ REVENUE COLLECTED Observation: Both Operational revenue budget and capital revenue budget increased during the 2018/19 adjustments budget process 17 - 100 000 000 200 000 000Western CapeNorthern CapeNorth WestMpumalangaLimpopoKwazulu-NatalGautengFree StateEastern CapeTotal revenue as at 30 June 2019Year to date: 30 June 2019Adjusted Budget Expenditure analysis as at 30 June 2019 Highlights: 30 June 2019 Total municipal expenditure Operating expenditure Capital Expenditure Highest spending levels R391.8 billion 87.9 per cent R336.4 billion 90.4 percent R55.4 billion 75.3 per cent GT : 94.4 per cent FS : 93.4 per cent KZN : 88.1 per cent Performance on core services mostly above 90 per cent with waste water management at 71.4 per cent.
18 Performance on core services above 80 per cent with the waste water management function being the lowest at 63.2 per cent.
9.1%5.1%37.3%17.7%4.9%5.0%4.0%1.7%15.3%Ration of the total expenditure per province as at 30 June 2019 - 20 40 60 80WaterElectricityWaste watermanagementWaste managementMetros performance against core services as at 30 June 2019RevenueExpenditure - 3 6 9 12 15 18 21WaterElectricityWaste watermanagementWaste managementSecondary cities performance against core services as at 30 June 2019RevenueExpenditure Personnel expenditure analysis as at 30 June 2019 Salaries and Wages expenditure R105.2 billion 93.1 per cent Adjusted personnel budget Highlights: 31 March 2019 R112.98 billion Highest Spending : 96.1 per cent GT KZN : 95.8 per cent EC : 93.9 per cent Salaries and Wages as a % of operating expenditure 30.1 per cent Compared to the 4th quarter of 2017/18, the adjusted budget for salaries and wages has increased by 6.9 per cent in the fourth quarter of 2018/19 19 93.9%79.9%96.1%95.8%84.5%90.4%91.3%88.4%92.8% -20.0%40.0%60.0%80.0%100.0%120.0%Salaries and wages spending as at 30 June 2019Remaining Salary and Wages budgetYTD : Salary and wages spendingSalary and wages spending as at 30 June 2019 Capital expenditure as at 30 June 2019 • • • • As at 30 June 2019, municipal capital spending on average was 75.3 per cent.
The biggest capital spending is allocated to water followed by roads transport, electricity and housing.

Although a slight decline in the capital spending is observed when compared to previous years, overall performance still remains unsatisfactory Under performance contributed to: – Weak multi-year budgeting; – – Supply Chain Management inefficiencies.
Limited planning and project management skills; and >78% 40 - 78% <40% 20 - 2 4 6 8 10 12 14 16BillionsCapital spending per Standard Classification as at 30 June 201977.50%81%80.50%79%82.30%75.30%2013/142014/152015/162016/172017/182018/19Capital expenditure for 4th quarter of 2013/14 to 2018/19 Summary of over- and underspending of budgets (30 June 2019) • There is a decrease in the under spending of the capital budget from 2017/18.
Analysis of Over and Under spending of expenditure for 2015/16 - 2018/19R thousands(Over)UnderNett(Over)UnderNett(Over)UnderNett(Over)UnderNettTotal (3 079 327) 43 699 930 40 620 603 (1 766 257) 53 093 175 51 326 919 (22 626 540) 66 833 502 44 206 962 (3 843 598) 57 804 639 53 961 040 Capital (1 037 171) 13 408 789 12 371 618 (1 389 980) 15 828 308 14 438 328 (8 186 799) 20 812 583 12 625 783 (836 236) 18 982 576 18 146 340 Operating (3 053 249) 31 302 234 28 248 985 (1 482 741) 38 371 331 36 888 591 (15 108 441) 46 689 620 31 581 179 (4 871 939) 40 686 639 35 814 700 Source: National Treasury Local Government database2018/192015/162016/172017/18Number of municipalities per interval for total expenditure as at 30 June 2019 (Preliminary results)InsufficientCountMore than -15%Between -15% and -10%Between -5% and -10%Between 0% and -5%Between 0% and 5%Between 5% and 10%Between 15% and 10%More than 15%InformationSummary per ProvinceEastern Cape1001152290Free State2001030170Gauteng001132130Kwazulu-Natal10133129250Limpopo0110204190Mpumalanga0001134110North West0001013170Northern Cape3020224180Western Cape0011019180Total71691229361570Source: National Treasury Local Government database(Over)TargetUnder Over- and underspending of Total Budget 2018/19 222 municipalities under spent their total budget by more than 15% 21 municipalities were on target with regard to their total adjusted budget spending Only 14 municipalities over spent their total budget.
22 22 71691229361570020406080100120140160180More than -15%Between -15% and -10%Between -5% and -10%Between 0% and -5%Between 0% and 5%Between 5% and 10%Between 15% and 10%More than 15%Insufficient Information(Over)TargetUnderAnalysis of Over and Under spending of expenditure as at 30 June 2019 Preliminary analysis of over- and underspending as at 30 June 2018/19 • Overspending R4.9bn • Underspending R40.7bn • Nett underspending R35.8bn • Number Overspending: 15 • Number Underspending: 211 • Number on target: 31 Operating budgets • Overspending R836.2m • Underspending R19bn • Nett underspending R18.1bn • Number Overspending: 28 • Number Underspending: 214 • Number on target: 15 Capital budgets • Allocated R40.9bn • Transferred R33.6bn • Spent R27.2bn Unspent conditional grants • Overspending: 24 • Underspending: 155 • Number on target: 72 23 National Grants spending per province as at 30 June 2019 Total conditional grants transferred to municipalities: 30 June 2019 R33.6 billion 82.3 per cent Total conditional grant allocations: 2018/19 R40.9 billion Total conditional grant expenditure as at 30 June 2018/19 R27.2 billion 80.1 per cent • R119.9 billion was allocated to LG in grants • Constitutes 27.3% of the total adjusted revenue budget for municipalities • As at the end of the 4th quarter expenditure was recorded at 80.1 per cent • This is despite MIG achieving expenditure of 92.7 per cent (biggest grant for LG) • Spending on operational grants were higher - incentive grant being the best performing programme (EPWP) (100 per cent), • followed by ISDG and FMG.
Infrastructure grants had a mixed bag of performance, as some performed well e.g.

MIG and INEP grant, while others performed poorly i.e.
MDRG, WSIG and MEHG 24 - 8BillionsNational grants spending as at 30 June 2019Actual Expenditure by MunicipalitiesTransfere to municipalities Outstanding debtors as at 30 June 2019 Aggregate Consumer debtors: 30 June 2019 R165.5 billion (R143.2 billion -4th Q : 2017/18) Compositions Households: R118.6 billion (71.7 per cent) Government: R10.3 billion (6.2 per cent) Debt below 90 days (collectable) R29.6 billion Provinces National Departments Metros R5.8 billion R3.5 billion 49.7 per cent of total outstanding municipal consumer debt (R165.5 billion) 25 20.822.924.927.229.685.890.6103.5116135.92014/152015/162016/172017/182018/19Receivables less than 90 days (collectable)Recievable older than 90 days (uncollectable)DebtswrittenoffIncrease1.44.14.21.41.7165.5143.2128.4113.5106.66.914.914.822.3 - 10 20 30 40 50 60 70Organs of StateCommercialHouseholdsOtherBillionsDebtors by customer group as at 30 June 2019MetrosSeccondary CitiesLocal munic Analysis of Debtors and Creditors 4th Quarter 2018/19 Results Quarter 4Quarter 1Quarter 2Quarter 3Quarter 4R billion2017/182018/192018/192018/192018/19Debtors Age AnalysisNational143.2158.9184.7162.9165.5Metros72.384.8100.483.982.2Secondary cities25.628.336.530.335.4Creditors Age AnalysisNational51.150.750.950.660.2Metros20.816.316.215.617.1Secondary cities12.014.315.415.518.8Percentage creditors over 90 daysEastern Cape30.2%34.2%30.9%80.7%33.4%Free State87.5%85.2%89.5%85.1%89.3%Gauteng3.7%3.4%3.9%80.9%5.3%KwaZulu-Natal16.4%23.5%30.3%78.7%27.7%Limpopo62.5%72.4%68.1%87.1%68.3%Mpumalanga65.6%73.1%82.5%90.4%75.5%North West71.1%70.7%72.3%89.0%57.7%Northern Cape70.3%77.3%79.3%89.9%76.7%Western Cape4.4%4.0%4.8%70.0%2.9% Collection rate as at 30 June 2019 • The aggregated year-to-date actual collection rate is 88.9 per cent compared to an adjusted budgeted collection rate of 88.9 per cent.
• This represents an aggregated under • performance of 1.2 per cent.

It is suspected that the reported collection rate is distorted owing to reporting inconsistencies on cash flow movements of municipalities and the incorrect classification of service charges.

• The big metros tend to distort the true collection rate of smaller municipalities.

• Municipalities are under strain - 43 municipalities collecting less than 50 per cent of their billing while 22 municipalities' collection rate is undetermined.
27 27 National collection rate as at 4th Quarter Ended 30 June 2019R thousands Adjusted Budget First Quarter 2018/19 Actual Second Quarter 2018/19 Actual Third Quarter 2018/19 Actual Fourth Quarter 2018/19 Actual Year to date: 30 June 2019 Actual Collection Rate88.9%83.4%91.3%90.7%90.9%88.9%Property rates92.6%77.5%94.3%88.1%89.1%86.8%Service charges - Total88.8%87.0%92.2%94.2%94.3%91.8%` Service charges - electricity revenue89.5%92.7%100.7%94.5%96.7%96.1%` Service charges - water revenue83.1%78.1%83.1%108.1%110.9%93.7%` Service charges - sanitation revenue83.9%63.9%61.7%64.0%55.6%61.3%` Service charges - refuse revenue82.1%71.7%80.4%88.5%76.6%79.1%` Service charges - other477.0%402.3%226.4%91.4%55.7%144.5%Interest earned - outstanding debtors57.6%55.3%44.9%23.8%42.8%43.2%Source: National Treasury Local Government database43153029526622< 5050 - 5960 - 6970 - 7980 - 94>= 95UnknownCollection rate breakdown as at 30 June 2019 Creditor analysis as at 30 June 2019 • • • R60.2 billion is owed by municipalities as at 30 June 2019 (R51.1 billion reported in the same quarter in 2017/18).
Highest percentage of outstanding creditors greater than 90 days: – Free State 89.3 per cent, Northern Cape 76.7 per cent and Mpumalanga at 75.5 per cent.
The lowest is Western Cape at 2.9 per cent – Year-on-year increase in outstanding creditors could be an indication that municipalities are experiencing liquidity and cash challenges and consequently are delaying the settlement of outstanding debt owed 28 2014/15 Q42015/16 Q42016/17 Q42017/18 Q42018/19 Q419.724.522.427.724.512.814.421.423.435.7Normal PayablesOverdue32.338.943.851.160.2TotalCreditorsCreditorsdifference6.44.97.29.133.4%89.3%5.3%27.7%68.3%75.5%57.7%76.7%2.9% -10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%100.0%Outstanding creditors over 90 days as at 30 June 2019 Quarterly cash balances for 4th quarter 30 June 2018/19 • A negative cash position is a very strong indicator that these municipalities are in financial distress.
• Municipalities with negative cash balances (in overdraft) at the end of the fourth quarter per province.

• Underperformance of actual collections against billed revenue holds a significant risk for the cash and liquidity position of municipalities as the planned expenditure is based on a higher level of collection.

• 45 Municipalities reported negative cash positions; an increase when compared to the 40 reported in the fourth quarter of 2017/18.
29 Negative cash balances as at 30 June 2019No of municipalities First Quarter 2018/19 Second Quarter 2018/19 Third Quarter 2018/19 Fourth Quarter 2018/19 Per ProvinceEastern Cape4228Free State3247Gauteng2000Kwazulu-Natal12611Limpopo3222Mpumalanga1102North West1354Northern Cape45610Western Cape0001Total19172545Source: National Treasury Local Government database2014/152015/162016/172017/182018/1947 45 46 40 45 Negative cash balance for the 4th quarter from 2014/15 to 2018/19 Asset Management • • • In a municipal context asset management comprises of two distinct expenditure classifications, namely: operational repairs and maintenance, including preventative maintenance; and asset renewal as part of the capital infrastructure budget Across all provinces, limited priority is given to this strategic spending area by municipalities.
This directly contributes to significant inefficiencies within the system through, among others: increasing water and electricity losses; deficient reticulation infrastructure; service delivery disruptions; revenue losses etc.
There is a increase in the amount used for new assets in the 4th quarter compared to the same quarter in 2016/17 and 2017/18 30 - 10 20 30 40 50 60Adjustment BudgetYTD ActualAdjustment BudgetYTD ActualAdjustment BudgetYTD Actual2016/172017/182018/19BillionsAsset management for the 4th quarter from 2016/17 to 2018/19Total New AssetsTotal Renewal of Existing AssetsTotal Repairs and maintenance expenditure Financial health of municipalities 2018/19 • • In aggregate (national) municipalities closed the 2018/19 financial year with positive cash balance of R50.1 billion (S71, Q4, 2018/19) There is improvement in cash balances and the major contributors are the metros and local municipalities • Overall all municipal categories (metros, local and district) experienced increase in debtors • Metros is the only category that experienced a decrease in creditors • The trend indicates the increasing financial pressures as consumers are not paying for services and municipalities are not paying suppliers 31 2017/182018/192017/182018/192017/182018/19Metros29 606 39330 523 16972 343 80182 192 75020 449 48417 085 301Local municipalities13 985 04615 377 42063 012 84874 516 36628 670 71340 187 132District municipalities6 182 7444 151 9167 824 2218 818 2341 938 3872 898 106National aggregate49 774 18250 052 505143 348 754165 527 35051 058 58360 170 539CategoryR'000Cash and cash equivalentsDebtorsCreditors THANK YOU For additional information on national and provincial budgets, please visit our new budget data portal: https://vulekamali.gov.za For information on local government finances, please visit: https://municipalmoney.gov.za Consequences of poor revenue management Poor data integrity Incorrect tariff setting Understated billing Unfunded budgets Inability to source financing Unable to contribute to internal capital programme Declining collection rate Over burden customer Inadequate focus on R & M Inadequate service delivery Tarnished municipal image/ Service delivery protests More damage 33 Outcomes of the financial assessment (1) No.
Measure Outcome 1.

Cash as a percentage of operating expenditure Overall negligible improvement in cash coverage ratio where the number of municipalities with cash coverage of less than one month decreased from 126 in 2016/17 to 124 in 2017/18 Also the number of municipalities with cash coverage exceeding 3 months improved from 58 in 2016/17 to 74 in 2017/18 2.
Negative cash balances Overall deteriorating cash positions Decrease in the number of municipalities with negative cash balances (from 19 in 20116/17 to 10 in 2017/18) 3.
Over spending of adjustment operating budgets Significant improvement in budget assumptions for the operating expenditure budget ( 25 municipalities overspent their operational budgets by more than 25 per cent when compared to 45 in 2016/17) The total number of municipalities that overspent increased from 155 in 2015/16 to 157 in 2017/18 4.
Under spending of original capital budgets Overall poor performance against the capital budget 92 municipalities underspent the capital budgets by more than 30 per cent in 2017/18 compared to 67 in 2016/17 The underspending of capital budgets in municipalities is mainly attributed to difficulties with planning and executing capital projects.

It could also be associated with over ambitious capital programmes and potential cash flow problems in municipalities 34 Outcomes of the financial assessment (2) No.
Measure Outcome 5.

Debtors as a percentage of own revenue Continuous growth in debtors compared to own revenue The number of municipalities with debtor levels higher than 30 per cent of own revenue increased from 129 in 2016/17 to 142 in 2017/18 6.

Year on year growth in debtors Significant increase in debtors The number of municipalities whose debtors grew by more than 20 per cent increased from 92 in 2016/17 to 120 in 2017/18 Overall debtors increased by R44.5 billion from 2016/17 to 2017/18 7.
Creditors as a percentage of cash and investments Slight improvement in creditors as a percentage of cash The number of municipalities whose creditors are more than 75 per cent of their cash reduced from 149 in 2016/17 to 139 in 2017/18 8.
Reliance on national and provincial government transfers to finance the capital budget Slight improvement in reliance on national and provincial transfers The number of municipalities whose capital budget is 75 per cent financed by national transfers decreased from 129 in 2015/16 to 94 in 2016/17 Also the number of municipalities whose capital budget is financed between 30 and 75 per cent from the national transfers decreased from 86 in 2016/17 to 53 in 2017/18 The underperformance of actual collections against billed revenue can be attributed to amongst others, slowdown, poorly designed revenue management, indigents, debtor policies and resistance to pay for services the affordability, economic 35